Sterling surges due to positive Brexit talks and market anticipation of a base rate rise on Thursday, euro makes gains versus most peers, as GDP rises

Nov 1 • Morning Roll Call • 50 Views • No Comments

The Eurozone delivered positive economic calendar news in the form of hard data on Wednesday, which caused the euro to rise versus many of its peers, with the notable exception of EUR/GBP, where the currency lost ground. GDP figures for the EZ beat both the Q3 and YoY forecasts, coming in at 0.6% and 2.5% respectively, a significant improvement on where the single bloc economy was situated approx. 24 months back. Inflation came in at 1.4% on Tuesday, missing the expectation of 1.5%. French GPD also beat forecast, coming in at 2.2% YoY, approximately double the growth witnessed in 2016.

Sterling experienced significant gains versus its peers on Tuesday, the rise was not based on any fundamental data; political issues with regards to Brexit, and the increased expectation of a base rate rise announcement from the BoE on Thursday, caused the U.K. pound to rally. E.U. officials appear to be confident that an agreement can be reached with the U.K. negotiating team in December; the key E.U. official Mr. Barnier delivered optimistic words, suggesting that the upcoming talks should deliver positive results. With the clock ticking down to a base rate announcement due at lunchtime GMT on Thursday, investors are concentrating on the outcome and as a consequence were bidding up the pound on Tuesday. Although recent more dovish statements from the BoE, may prove to be disappointing for FX traders, who are expecting to hear a narrative committing to further rate rises in 2018. The accepted market wisdom appears to suggest that, should the BoE/MPC reveal a base rate rise on Thursday, it’ll be a one off measure, in an attempt to stall inflationary pressures built up since June 2016, due to a weak pound.

U.S. equities moved ahead on Tuesday, as did the dollar versus certain of its main peers; CHF, CAD and JPY, with analysts still divided in their opinion regarding the potential FOMC rate rise which may be announced this Wednesday 1st November. Consumer confidence surged to a multi month high of 125.9 for October, as other conference board metrics also beat forecasts, whilst house prices (according to the Case Shiller index), have risen by 6.07% YoY. Canada’s GDP marginally missed forecast, coming in at 3.5%. New Zealand’s employment and unemployment statistics came in displaying healthy improvements; employment change YoY was up 4.2%. Canada’s dollar fell versus its main peers as a consequence, whilst the New Zealand kiwi surged late on in the day’s trading session, as the news broke. Yen also experienced a fall during Tuesday’s trading sessions, versus the majority of its peers.

EURO

EUR/USD ended the day up circa 0.2% at 1.1653, EUR/ZND ended the day down circa 0.2%, having breached R1 earlier in the day, the positive NZ jobs numbers caused the kiwi currency to rally versus its main peers late evening on Tuesday. EUR/JPY ended the day up approx. 0.5% at 132.64, breaching R1. EUR/GBP fell by circa 0.6%, whilst breaching S2, closing out the day at 0.8667, as sterling strength dominated the FX markets throughout Tuesday’s trading sessions. EUR/CHF closed the day out up circa 0.3% at 1.1622, resting on the R1 pivot point.

STERLING

GBP/USD was up approx 0.6% at 1.3292 on the day, resting on R2. Having breached R2 earlier in the trading sessions, GBP/NZD reversed trend, closing out the day at 1.9283. GBP/JPY experienced a surge closing the day out up over 1% breaching R3. GBP/AUD and GBP/CAD rose by over 0.8% and both currency pairs breached R2 on the day. GBP/CHF ended the day resting on R2 at circa 1.3258, up 0.6%.

US.DOLLAR

USD/JPY ended the day up circa 0.3%, at approx. 113.67, above the R1 pivot point. USD/CHF breached R1 to then retrace, ending the day up circa 0.2%, at 0.9975. USD/CAD rose by circa 0.3% on the day, closing out at approx. 1.2900.

EQUITIES AND COMMODITIES SNAPSHOT FOR OCTOBER 31st

• DJIA closed up 0.12%.
• SPX closed up 0.09%.
• EURO STOXX 50 closed up 0.32%.
• FTSE 100 closed up 0.07%.
• DAX closed up 0.09%.
• CAC closed up 0.18%.
• Gold ended the day flat at $1270 per ounce.
• WTI ended the day up 0.6% at approx. $54.77 a barrel.

KEY ECONOMIC CALENDAR EVENTS FOR NOVEMBER 1st

• GBP Markit UK PMI Manufacturing SA (OCT).

• USD ADP Employment Change (OCT).

• CAD Markit Canada Manufacturing PMI (OCT).

• USD ISM Manufacturing (OCT).

• USD ISM Employment (OCT).

• USD FOMC Rate Decision (Upper Bound) (NOV 01).

• CAD Poloz and Wilkins testify at Senate.

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